COST ACCOUNTING
COST BEHAVIORS
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Question
[CLICK ON ANY CHOICE TO KNOW THE RIGHT ANSWER]
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remains constant in total and remains constant per unit
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remains constant in total and changes per unit
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changes in total and remains constant per unit
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changes in total and changes per unit
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Detailed explanation-1: -Variable costs typically change in proportion to changes in volume of activity. If volume of activity doubles, total variable costs also double, while the cost per unit remains the same.
Detailed explanation-2: -Cost behaviours break down into four expense classifications: variable, fixed, step, and mixed costs.
Detailed explanation-3: -c. varies in direct proportion with the activity level. This is the correct option. If a variable cost is $50, 000 when 10, 000 units are produced, it will be $100, 000 when 20, 000 units are produced.
Detailed explanation-4: -The total variable costs changes proportionately with respect to the changes in the level of activity. However, the unit variable costs remains constant irrespective to the changes in the level of activity.